A survey of North American equities heading in both directions
On the rise
Walmart (WMT-N) on Tuesday raised its annual sales and profit forecast for the third consecutive time, with people buying more groceries and merchandise online and at its stores, a sign that it may be gaining market share ahead of the holiday season.
Shares of Walmart, which are up nearly 60 per cent this year, rose 3 per cent further on Tuesday.
The retailer is among the first major U.S. chains to provide insight into the all-important holiday quarter and how consumers are planning to spend as inflation ebbs.
“In the U.S., in-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that,” Walmart CEO Doug McMillon said.
Though inflation has not made much headway in recent months, it is on a downward trend, raising purchasing power. Walmart said it saw share gains across income cohorts mainly led by upper-income households, which make more than US$100,000 in annual income.
The retail bellwether now forecast fiscal 2025 consolidated net sales to rise in the range of 4.8 per cent to 5.1 per cent, compared with prior expectations of 3.75-per-cent to 4.75-per-cent growth.
It also expects annual adjusted profit per share to be between US$2.42 and US$2.47, compared with its previous forecast of US$2.35 and US$2.43.
In the third quarter ended Oct. 31, Walmart’s U.S. comparable sales rose 5.3 per cent, beating analysts estimates of a 3.61-per-cent increase, according to data compiled by LSEG. It saw sales growth across categories including the general merchandise segment that had suffered declines for over two years due to sticky inflation.
Walmart also posted comparable sales growth in its health and wellness category, helped by strong demand for GLP-1 or weight-loss drugs.
As purchasing power increases, analysts expect upper and middle income consumers to mainly drive the shift back in spending on non-essential, nice-to-have merchandise.
The company has invested billions on automation in its supply chain to help stock fresher produce and improve delivery times as consumers increasingly prefer the convenience of purchasing groceries online.
To broaden the appeal of its delivery service, Walmart slashed the annual fee for its Walmart Plus membership, by 50 per cent ahead of the holiday season. Walmart Plus members receive unlimited free same-day deliveries from stores on orders over US$35.
The retailer said in the third quarter total e-commerce sales rose 27 per cent, compared to the 21 per cent in the prior quarter.
The retailer reported quarterly adjusted profit of 58 US cents per share. Analysts were expecting 53 US cents per share.
Blackstone (BX-N) was higher by 1 per cent on news it will acquire a majority stake in Jersey Mike’s Subs, the sandwich chain said on Tuesday, marking the private equity firm’s latest investment in a franchise business.
Reuters had reported on Monday, citing a person familiar with the matter, that Blackstone was nearing a deal for Jersey Mike’s at around US$8-billion, including debt.
The deal underscores private equity firms’ increasing interest in franchise operators.
Last year, private equity firm Roark Capital agreed to buy Subway, Jersey Mike’s bigger rival, in a deal valued at up to US$9.55-billion.
Blackstone, the world’s largest alternative asset manager with more than US$1.1-trillion in assets under management, has been on an investing spree in food franchises this year.
In April, Blackstone agreed to buy Tropical Smoothie Cafe, a franchiser of fast casual restaurants, from private equity firm Levine Leichtman Capital Partners.
Blackstone’s previous franchise deals include the 2007 acquisition of Hilton Hotels and its investment in Servpro, a franchise in the cleanup and emergency restoration industry.
“We believe we are still in the early innings of Jersey Mike’s growth story and that Blackstone is the right partner to help us reach even greater heights,” Jersey Mike’s founder and CEO Peter Cancro said.
Mr. Cancro will maintain an equity stake in the company and continue to lead the business.
“Blackstone has helped drive the success of some of the most iconic franchise businesses globally and we look forward to working with them to help make significant new investments going forward,” Cancro said.
The deal is expected to close in early 2025.
Shares of Super Micro Computer (SMCI-Q) soared on Tuesday after the server maker sought an extension from Nasdaq for its delayed financial filings and appointed a new auditor as it looks to avoid being delisted.
Super Micro announced the appointment of BDO USA as its independent auditor, effective immediately, less than a month after Ernst & Young resigned after it raised concerns about the company’s governance, transparency and internal control over financial reporting.
“BDO’s arrival comes just in the nick of time to satisfy the Nasdaq’s 60-day deadline to file a compliance plan but even if that plan is accepted the real test will be when those delinquent accounts (quarterly and annual reports) finally see the light of day,” said Danni Hewson, head of financial analysis at AJ Bell.
If its filing plan is accepted by the exchange, Super Micro’s deadline could be extended to February, allowing its shares to remain on the Nasdaq until a final compliance decision is made.
Should the plan fail to get approval, the company can initiate a process to review the decision by requesting a hearing from the exchange’s Hearings Panel, which results in a 15-day stay of delisting with the possibility to extend up to 180 days.
Super Micro’s potential Nasdaq delisting adds another layer of complexity to its turbulent year, despite opening 2024 on a positive note amid Wall Street’s high expectations due to surging demand for its AI servers.
Through Monday’s close, its shares have fallen about 24 per cent this year and tumbled more than 82 per cent from a record high in March.
In 2019, Super Micro was delisted from the Nasdaq exchange after it missed deadlines for annual and quarterly reports. It was approved to rejoin in 2020 after settling a U.S. Securities and Exchange Commission probe by paying a penalty of US$17.5-million.
On the decline
Shares of TC Energy (TRP-T) dipped 0.5 per cent after it said on Tuesday it expects 2025 core profit to be in the range of about $10.7-billion to $10.9-billion, higher than its 2024 forecast, due to rising demand for natural gas and electrification.
The U.S. Energy Information Administration, in its latest short-term energy outlook report, saw the country’s gas consumption rising to a record 90 billion cubic feet per day (bcfd) in 2024.
The consumption is expected to ease to 89.6 bcfd in 2025, which will still be higher than the previous record of 89.1 bcfd in 2023.
For 2024, the Canadian pipeline operator expects core profit to be at the upper end of $9.9-billion to $10.1-billion, excluding its Liquid Pipelines segment.
The company completed the spin-off of its Liquid Pipelines unit in October, as it looked to focus on natural gas and reduce debt.
North America’s rising natural gas demand was driven by higher LNG exports, retiring coal plants and growing consumption in data centers associated with artificial intelligence operations, TC Energy said in its third-quarter earnings call.
The company sees data center opportunities of more than two bcfd in North America, according to its investor presentation slides.
It also announced four new growth projects aligned with increasing demand for natural gas and nuclear power generation, which would total to nearly $1.5-billion in capital expenditure.
One of the projects includes expanding power generation at its Ontario nuclear plant, Bruce Power, by adding 90 megawatts, largely due to rising power demand in the region.
TC Energy also said nearly 97 per cent of its outlook was underpinned by rate regulation, along with long-term take-or-pay contracts.
Alimentation Couche-Tard Inc. (ATD-T) slid 1 per cent after Japanese public broadcaster NHK reported on Tuesday the founding Ito family behind retailer Seven & i aims to raise more than 8 trillion yen (US$52-billion) to take it private by the end of this financial year,
The family has established a special purpose company that is in talks with Japan’s three largest lenders and major U.S. financial institutions to raise funds to take the 7-Eleven owner private.
Seven & i has been under pressure to convince investors it can enhance value on its own and fend off a $47-billion takeover bid from Canada’s Alimentation Couche-Tard. It said last week it had received a buyout proposal from the founding Ito family.
Going private would allow it to continue under current management and remove pressure from shareholders to sell off more of its assets - as well as eliminate the threat from a bidder that it may see as hostile. A management buyout offer could also be a tactic to force Couche-Tard to bid more.
The company’s shares ended little changed on Tuesday, but have climbed by more than 50 per cent to record highs since August as takeover speculation swirled.
George Weston Ltd. (WN-T) was lower by 3.2 per cent after it reported a third-quarter profit attributable to common shareholders of $15-million compared with a profit of $610-million in the same quarter a year ago as it was hit by a large one-time charge.
The company, which owns a majority stake in Loblaw Companies Ltd. and a large stake in Choice Properties Real Estate Investment Trust, says the profit amounted to eight cents per diluted share for the quarter ended Oct. 5.
The result was down from a profit of $4.41 per diluted share in the same quarter last year.
George Weston says the drop compared with a year ago was due to a $787-million fair value adjustment related to an increase in Choice Properties’ unit price.
On an adjusted basis, the company says it earned $3.57 per share, up from an adjusted profit of $3.36 per share in the same quarter last year.
Revenue for the quarter totalled $18.69-billion, up from $18.41-billion a year earlier.
Lowe’s Cos (LOW-N) forecast a slower-than-expected drop in annual comparable sales on Tuesday, banking on a boost to its current-quarter sales from hurricane-related demand, although big-ticket spending remained strained.
The home improvement retailer also beat third-quarter comparable sales and profit estimates, similar to bigger rival Home Depot, which last week noted higher demand for building materials and paints amid hurricane rebuilding efforts.
Hurricanes Helene and Milton devastated parts of the United States, including Florida and North Carolina, causing extensive damage to homes, bridges, power infrastructure and crops.
Results this quarter were modestly better than expected, even excluding storm-related activity, driven by growth in the company’s professional category, strong online sales and smaller-ticket outdoor DIY projects, Lowe’s CEO Marvin Ellison said.
Quarterly gross margins were “a tad light” at 33.7 per cent, likely driven by a low-margin product-mix of storm sales, J.P.Morgan analyst Christopher Horvers said in a note.
Shares of the company fell on Tuesday after having risen 22 per cent this year. It trimmed its annual adjusted margin forecast to a range of 12.3 per cent to 12.4 per cent, from a previous range of 12.4 per cent to 12.5 per cent.
Lowe’s, which generates roughly 75 per cent of sales from the do-it-yourself category, has witnessed persistent weakness as higher interest rates over the last few years made projects requiring refinancing less appealing.
“We find it too early to call an inflection point in underlying home improvement demand yet,” said David Wagner portfolio manager at Aptus Capital Advisors, which holds Lowe’s ETFs.
It reported a 1.1-per-cent drop in same-store sales for the quarter ended Nov. 1, better than analysts’ average estimate of a 2.86-per-cent decline, according to data compiled by LSEG.
Lowe’s earned US$2.89 per share on an adjusted basis, beating an estimate of US$2.82 per share.
The company expects same-store sales to be down between 3 per cent and 3.5 per cent in 2024 from its prior forecast of a decline in the range of 3.5 per cent to 4 per cent.
Merck (MRK-N) said on Tuesday a study showed its injectable version of cancer drug Keytruda was not inferior to the currently approved intravenous formulation of its treatment, likely making it even more accessible and easier to administer.
Shares of Merck finished narrowly lower.
The pharmaceutical company was testing the injectable version of the world’s biggest-selling drug in a late-stage trial of patients with a type of lung cancer.
The injectable version could potentially protect the drug, which had sales of about US$25-billion last year, from competition that is expected when the IV version loses exclusivity later in the decade.
Merck plans to discuss the results with regulators globally as soon as possible, said Marjorie Green, head of oncology, global clinical development at the company’s research unit.
Keytruda was injected under the skin in about 2-3 minutes in the trial, compared with the current delivery method in which patients are put on an intravenous drip for about 30 minutes in a health office once every three or six weeks.
Despite the short time of administration, the injectable version was also non-inferior in terms of exposure in the patients’ bodies as well as its concentration immediately before the next dose was administered, Merck said.
The injection is a fixed-dose combination of Keytruda with berahyaluronidase alfa, an enzyme that allows large volume of subcutaneous, or under the skin, administration of drugs that are typically given as an IV infusion.
Donald Trump’s social media company (DJT-Q) is in advanced talks to buy crypto trading firm Bakkt (BKKT-N), the Financial Times reported, citing two people with knowledge of the talks.
Trump Media and Technology Group, which operates Truth Social, is close to an all-stock acquisition of Bakkt, the report said on Monday.
A deal would help consolidate Trump’s involvement with an industry that he championed in the run-up to the U.S. presidential election.
Bakkt said on Tuesday it was aware of “the rumors that appeared in the financial press regarding a potential transaction involving the company,” but the company “does not comment on market rumors or speculation.”
Shares of Bakkt, backed by NYSE-owner Intercontinental Exchange (ICE-N), which closed up 162.5 per cent on Monday after FT’s report, were up further on Tuesday.
Trump Media and Technology Group’s shares, which closed up 16.7 per cent on Monday, slipped in Tuesday trading.
The president-elect has also launched a new crypto venture, World Liberty Financial.
With files from staff and wires